Cash America 2015 Annual Report Download - page 33

The Company is subject to continuing contingent liabilities of Enova.
Even though the Company and Enova are now separate, publicly-traded companies, there are several
significant areas where the liabilities of Enova may become the Company’s obligations. For example, under the
Internal Revenue Code and the related rules and regulations, each corporation that was a member of the Company’s
consolidated U.S. federal income tax reporting group during any taxable period or portion of any taxable period
ending on or before the effective time of the distribution is jointly and severally liable for the U.S. federal income
tax liability of the entire consolidated tax reporting group for the Company for that taxable period. In addition, the
Tax Matters Agreement with Enova allocates the responsibility for prior period taxes of the Company’s consolidated
tax reporting group between the Company and Enova; however, if Enova is unable to pay any prior period taxes for
which it is responsible, the Company could be required to pay the entire amount of such taxes.
The Company could be exposed to potential liabilities arising out of state and federal fraudulent conveyance laws
and legal distribution requirements in connection with the Enova Spin-off.
The Enova Spin-off could be challenged under various state and federal fraudulent conveyance laws. An
unpaid creditor or an entity vested with the power of such creditor (such as a trustee or debtor-in-possession in a
bankruptcy) could claim that the Enova Spin-off left the Company insolvent or with unreasonably small capital or
that the Company intended or believed it would incur debts beyond its ability to pay such debts as they mature and
that the Company did not receive fair consideration or reasonably equivalent value in the Enova Spin-off and
distribution. If a court were to agree with such a plaintiff, then such court could void the distribution as a fraudulent
transfer and could impose a number of different remedies, including without limitation, returning Enova’s assets or
Enova’s shares that are distributed to the Company.
The measure of insolvency for purposes of the fraudulent conveyance laws will vary depending on which
jurisdiction’s law is applied. Generally, however, an entity would be considered insolvent if either the fair saleable
value of its assets is less than the amount of its liabilities (including the probable amount of contingent liabilities),
or it is unlikely to be able to pay its liabilities as they become due. The Company does not know what standard a
court would apply to determine insolvency. Further, a court could determine that the Company was insolvent at the
time of or after giving effect to the Enova Spin-off.
Under the Separation and Distribution Agreement with Enova, the Company is responsible for and has
retained the debts, liabilities and other obligations related to the business or businesses which the Company owns
and operates following the Enova Spin-off and Enova is responsible for and has assumed the debts, liabilities and
other obligations related to the business or businesses that Enova owns and operates following the Enova Spin-off.
Although the Company does not expect to be liable for any obligations not expressly retained by it pursuant to the
Separation and Distribution Agreement, it is possible that the Company could be required to assume responsibility
for certain obligations assumed by Enova under the Separation and Distribution Agreement should Enova fail to pay
or perform its assumed obligations.
Certain members of management, directors and shareholders may face actual or potential conflicts of interest.
As a result of the Enova Spin-off, the Company’s management and directors and the management and
directors of Enova may own both the Company’s common stock and Enova’s common stock. This ownership
overlap could create, or appear to create, potential conflicts of interest when the Company’s management and
directors and Enova’s management and directors face decisions that could have different implications for the
Company and Enova. For example, potential conflicts of interest could arise in connection with the resolution of
any dispute between the Company and Enova regarding the terms of the agreements governing the Enova Spin-off
and the Company’s relationship with Enova thereafter or in the strategy for defending or resolving any litigation in
which both the Company and Enova are involved. These agreements include the Separation and Distribution
Agreement, the Tax Matters Agreement, the Stockholder’s and Registration Rights Agreement, the Transition
Services Agreement, the Software Lease and Maintenance Agreement and any commercial agreements between the
parties or their affiliates. Potential conflicts of interest may also arise because the Company’s Executive Chairman
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